Malaysia to Jail Illegal ICO and Crypto Exchanges Operators for 10 Years

Running an unregistered crypto exchange or an initial coin offering (ICO) in Malaysia could land the operator in jail for a maximum of 10 years.

$2.43 Million in Fines

Securities Commission Malaysia (SC), the country’s top financial watchdog, has announced that it would categorize cryptocurrencies such as Bitcoin as securities. The commission confirmed in a press release that the said regulations have come into force by January 15. Therefore, anyone planning to run crypto operations inside the country would have to obtain a license from the SC.

Malaysia’s finance minister Lim Guan Eng clarified that individuals found to be breaking their crypto laws would be treated according to the securities laws guidelines.

“Any person offering an ICO or operating a digital asset exchange without SC’s approval may be punished, on conviction, with imprisonment not exceeding ten years and fine not exceeding RM10mil,” the minister told The Star, a Malaysian daily.

Lim also directed the SC to coordinate with Bank Negara Malaysia (BNM), the country’s central bank, to release a complete legal framework for the cryptocurrency industry by Q1 2019.

“The guidelines will among others, establish criteria for determining fit and properness of issuers and exchange operators, disclosure standards and best practices in price discovery, trading rules, and client asset protection.” read the press release. “Those dealing in digital assets will be required to put in place anti-money laundering and counter-terrorism financing (AML / CFT) rules, cyber security and business continuity measures.”

BNM published a list of local crypto companies that have established themselves as trading platforms and wallets. The central bank clarified that it has neither licensed or offering any permissions to these organizations to continue their crypto operations. These companies are Belfrics Malaysia, Bit Malay, Bitpoint Malaysia, Bit Trade Enterprise, Bong Technology, Bxm, Luno Malaysia, Openbit, Udax International, Upbit Malaysia, and Xbit Asia.

Not Anti-Crypto

The Malaysian Ministry of Finance (MoF) clarified that their strict stance comes in the wake of growing investment and money laundering frauds, as well as of reports concerning terrorist financing. Lim said that their government and regulators believe in the potential of digital assets.

“In particular,” added the minister, “we believe digital assets have a role to play as an alternative fundraising avenue for entrepreneurs and new businesses and an [alternative] asset class for investors.”

In December, the SC and BNM had published a joint statement had clarified that the entire focus of crypto regulations would be on eradicating bad elements from the Malaysia crypto space.

With Malaysia effectively categorizing all the crypto tokens as securities, utility tokens like Bitcoin, Ethereum and Ripple have also come under the purview of the same regulation. Ripple Labs mainly could find it challenging to offer its remittance services in Malaysia. The company remains operational in the region through banks it has partnered with in the past.